A recent report unveiled on June 28 at the Global Review of Aid for Trade highlights significant trade opportunities for developing economies and least-developed countries (LDCs) amid the global shift towards cleaner energy sources. The report, titled “Aid for Trade in Action: Supporting the Transition to Clean Energy,” emphasizes the vital role of development finance in enabling these economies to capitalize on emerging opportunities within global value chains related to clean energy products and services.
The report underscores the rapid adoption of clean energy sources, with wind, solar, hydropower, hydrogen, and nuclear power now accounting for nearly 40% of global electricity production. This percentage is expected to increase as the cost of these technologies decreases and countries intensify efforts to meet net-zero greenhouse gas emission targets. The transition to clean energy presents a valuable opportunity for developing economies and LDCs to expand their trade volumes and achieve export diversification.
Aid for Trade is already making a significant impact on the clean energy transition. Between 2011 and 2021, approximately US$ 60 billion, or 30% of all Aid for Trade commitments with climate objectives, was directed towards the energy sector. However, this amount remains insufficient in the context of overall climate finance flows. Currently, developing economies and LDCs receive less than one-fifth of global clean energy investments, limiting their ability to fully capitalize on trade opportunities and meet their national determined contributions.
The report identifies three key segments of the clean energy value chain where developing economies could integrate more fully into global trade: minerals and metals, machinery and equipment manufacturing, and services. Additionally, it explores development opportunities related to carbon credits and the benefits of utilizing carbon capture and storage systems to reduce the carbon intensity of existing export baskets.
In the context of minerals and metals, enhanced support could help developing economies and LDCs with significant resources attract investments in sustainable extraction facilities. The manufacture of clean energy equipment, projected to exceed US$ 1 trillion by 2050, offers opportunities for these economies to become manufacturing hubs. Moreover, developing services sector operations related to clean energy generation could boost cross-border trade prospects, generate growth opportunities, and create jobs.
The report delves into specific opportunities within five clean energy value chains: wind, solar photovoltaic (PV), green hydrogen, hydropower, and nuclear power. It provides examples and case studies of how Aid for Trade is helping developing economies harness opportunities in each area and address challenges that impede greater value chain participation.
Concluding with a call to further align Aid for Trade with clean energy opportunities, the report advocates for mobilizing necessary financial resources, building trade capacity, and fostering international cooperation. These measures can ensure a just and inclusive transition to a cleaner, more sustainable future, benefiting global trade and economic growth.
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